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SAHIL BANSAL
UNIVERSITY, JODHPUR
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INTRODUCTION
World Bank, in their Doing Business Report, 2017 (the report), ranked
India at 130 out of 190 economies.1 In the report, Indias ranking is given
on the basis of performance in 10 specific areas (in Delhi and Mumbai)
namely resolving insolvency, trading across borders, enforcing contracts,
paying taxes, starting a business, dealing with construction permits,
registering property, protecting minority investors, getting electricity and
getting credit.2
In the report, India currently ranks in the top 50 economies in the world
on three of the ten indicators namely getting credit, protecting minority
investors and getting electricity but at the same time, it has a three digit
rank in the other indicators.3 However, if India wants to improve its
aggregate ranking to top 50 countries in next years World Bank Doing
Business assessment, the necessary law and policy reforms below-
mentioned are required in the 10 specific areas mentioned above.
1 World Bank. 2017. Doing Business 2017: Equal Opportunity for All.
Washington, DC: World Bank. DOI: 10.1596/978-1-4648-0948-4. License:
Creative Commons Attribution CC BY 3.0 IGO (The Report), p. 7.
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seems to be with the recovery rate of the creditors 5, time to resolve
insolvency6, costs involved7 and the strength of insolvency framework8.
However, for the rankings, the report did not take into account various
reforms introduced/implemented by India after 1 June, 2016.9 For
instance, the implementation of Insolvency and Bankruptcy Code, 2016
(Code) with an objective of less time in resolution, lower losses in
recovery, higher levels of debt financing across a variety of debt
instruments10 and cross border insolvency matters.11 Apart from the
Code, measures such as the Corporate Debt Restructuring, the Joint
Lenders Forum and the Strategic Debt Restructuring scheme are out-of-
court mechanisms to restructure loan contracts with debtors which will
cut the time and costs to resolve insolvency. 12 Also, in June 2016 the S4A
Scheme was introduced by the RBI as an optional framework for the
5 The report, p. 213. (The creditors in India recover about 25.7 cents on the
dollar compared to 80.4 cents in the USA. (Rank 7 in the Doing Business Index))
6 The report, p. 213. (It takes 4.3 years to resolve insolvency in India whereas in
the USA, it is 1.5 years.)
7 The report, p. 213. (In India, the costs are 9 percent of the estate whereas in
the USA it is 8.2 percent of the estate.)
9 Ease of doing business: Indias brush with reality, Live Mint, published on 28
October, 2016, online available at <
http://www.livemint.com/Opinion/iwNkJN2L8QFtJIZCB2bJtI/Ease-of-doing-
business-Indias-brush-with-reality.html> last accessed on 20 January, 2017.
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resolution of large stressed accounts. 13 As the requisite law and policy
changes have already been made by the government, the in toto
implementation still seems to be an issue. For instance, the provision
dealing with the Voluntary Winding up in the Code (section 59) has not
been implemented yet and still the lengthy procedure under Companies
Act, 1956 is applicable. So, the speedy implementation of the
abovementioned laws and schemes is suggested.
In the category of Trading across borders, India got 143 rd position in the
report, one position ahead of what it got last year. 14 In the report,
broadly there is an attempt to capture three types of costs - documentary
compliance, border compliance and domestic transport, where cost
defined both as time taken and money spent. 15 The report recognised the
implementation of the Single Window Interface for Trade (SWIFT) by the
Central Board of Excise and Customs (CBEC) which provides e-filing
services to the trade and cargo carriers and other clients of Customs
Department.16 (Via an e-commerce portal ICEGATE) At present, about
24,000 users are registered with ICEGATE who are serving about 6.72
lakhs importers/exporters.17 Despite that, there is not much improvement
in the standings of Trading across borders from the last year. The major
problems include too many unorganised and unregistered players;
13 First S4A debt recast gets approval, The Hindu, Published on 05 November,
2016, online available at < http://www.thehindu.com/business/Industry/First-
S4A-debt-recast-gets-approval/article16437605.ece> last accessed on 21
January, 2017.
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registration, regulation and accreditation by too many agencies under
too many statutes/orders; too many heads for levying charges; and non-
standardised formats for documents.18 It is advised that SWIFT should
integrate assorted government agencies and standardise documents,
declarations and forms. Moreover, the government should put all the
regulations under one statute to curb the time lag and cost issue. It is
also advised that the government should include strategical steps to
improve the rankings in Trading across borders in its eight-point
strategy19 to improve rankings in doing business.
18 Report on End-to-End Logistics & Costs for Shipping through Ports, Indian
Institute of Foreign Trade, Published in June 2016, online available at <
http://nsb.nic.in/upload/files/latest/Reportt.pdf> last accessed on 21 January,
2017.
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filing of written statement and calling of witnesses, tendering of evidence
and delivery of judgment makes the process of enforcing contract very
lengthy.24 It is advised that the notices should be allowed to send via
social media i.e. Facebook, Whatsapp etc. following the footsteps of
countries like New Zealand.25 Moreover, it is also advised to enact the
provisions for compulsory arbitration for commercial disputes coming
straight to courts to cut down cost and time. Though the government has
added the initiative of e-Courts that should be expedited for electronic
filing of complaints, summons and payments especially in the
Commercial Court26 but for the existing physical courts, it is advised to
recruit more number of judges.
In the category of Paying taxes, India got 172 nd position in the report.27
Though the report acknowledges that India made paying taxes easier by
introducing an electronic system for paying employee state insurance
contributions28 but still the Indian tax regime is characterised by high tax
rates, massive build-up of tax disputes and arbitrary interpretations. The
major problems include high tax rates (60.6 percent of profit) 29 as
compared to the countries like UK (30.9 percent of profit) 30 and USA. (44
percent of profit)31. Moreover, unprecedented increase in litigation and
long pendency of adjudicating proceedings dents the confidence of
24 Ibid.
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investors, transfer pricing issues and inadequate technological
infrastructure.32 Therefore, it is suggested that to make India an
attractive business destination, the government should consider
reviewing and lowering the tax rates in the phased manner. It is also
suggested to make a progressive tax regime that lead to efficient
resource allocation. This includes reduction in the number of levies and
simplification of their nature. In this regard, GST is one of the immediate
recourse which should be implemented without any delay (resolving
allocation issues raised by the states immediately) as it could address the
existing indirect tax system like tax cascading complexity and poor
infrastructure along with high cost of compliance. Moreover, the near
implementation of General Anti- Avoidance Rules in 2017, emphasised on
getting the tax base right would help India in getting a high rank in
paying taxes.
33 Supra note 19. (It includes (i) e-Biz portal shall be mandated for starting a
business which shall include three services of Ministry of Corporate Affairs,
Registration for PAN and TAN and also for EPFO & ESIC. (ii) Ministry of
Corporate Affairs, CBDT, Ministry of Labour & Employment will work towards
reducing the number of procedures for starting a business to 4 and the number
of days to start a business also to 4. (iii)Shram Suvidha Portal shall be the only
portal for filing returns, challan and making online payment for EPFO & ESIC
contributions as well as other filings and payments.)
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this heading. For instance, Guatemala introduced Mi Negocio which is an
online system through which entrepreneurs can register with the
Commercial Registrar, the Tax Authority, the Social Security Institute and
the Ministry of Labor through the system and it helped reduce the
number of procedures and time taken by more than half. 34 Apart from
that, it is suggested to create a Single Window Clearance Mechanism like
one stop shop35 where all the processes necessary for starting a business
should be moved online on a single platform. Moreover, the costs
involved for starting a business (13.8 percent of per capita income) are
high and need to be significantly brought down. Also, for grievance
redressal, a dedicated agency or team within the departments is
essential to address entrepreneur concerns. Apart from that, the
government should not discourage the new business or start-ups from
doing business.36
36 For instance, on 30 August 2016, the Securities and Exchange Board of India
(SEBI) issued a press release titled SEBI Cautions Investors where it
questioned the validity of online platforms facilitating equity crowd-funding
which is not a move that encourages the start-ups to grow. Online available at
<http://www.sebi.gov.in/sebiweb/home/detail/34568/yes/PR-SEBI-CAUTIONS-
INVESTORS> last visited on 25 January, 2017.
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different fields, which will deal with applications for clearances and
permissions under environment related laws at the Central and State
level respectively thus making it a single window. 37 A fast track
procedure for linear projects (roads, railways and transmission lines),
power and mining projects and for the projects of national importance
has also been prescribed in the new mechanism. 38 Adoption and
successful implementation of these reforms can do much to ease
obtaining necessary environment clearances for undertaking
construction. Also, government should significantly invest in capacity
building and training of its personnel to efficiently exercise technical and
administrative regulation of the construction sector.
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and no equal access to property to men and women. 41 Therefore, it is
advised to lower down the number of procedures and time. (By providing
single window clearance mechanism and in this regard an electronic
application or online portal for all the procedures could be developed)
Moreover, reforms should also be made to cut the cost for registering
property which is also relatively high. In addition to that, the electronic
databases for checking the encumbrances over the property and a
nation-wide database to verify the accuracy of identity documents is
required as well. Also, requisite changes in law should be made to give
equal ownership rights to the property to men and women. In this
direction, a Uniform Civil Code is also recommended.
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the proposal of Universal object clause 45 for the companies where there
is no need to specify the object of the business by the company. This
could go against the minority investors/shareholders as the board may
involve in diversion of funds to any other business because the object is
not defined. (Subsequently, no remedy under section 241-242 of the
Companies Act, 2013 for diversion of funds) It is advised not to
incorporate such amendments as it dilutes the transparency and
corporate governance. Moreover, the provisions regarding whistle-blower
policy should be incorporated within the Companies Act, 2013 to report
the mismanagements in the company.
49 Ibid.
50 Ibid.
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tariff structure of the electricity provided to the commercial
establishments as the rates are higher than what is charged from
households. Moreover, accountability and transparency mechanisms are
required to stop the red-tapism.
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demonetisation. It is advised that Small Finance Banks such as Micro
lenders should be promoted more for credit purpose in rural areas. The
interest rate on the loans should also be lowered in the aftermath of
demonetisation.
CONCLUSION
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